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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

OPTHALMIC IMAGING SYSTEMS,

a California corporation,

NO. CIV. S-04-482 LKK/DAD

Plaintiff,

v. O R D E R

MARK FUKUHARA, an individual;

DOUGLAS BURLAND, an individual;

MICHAEL GERKOVICH, an individual;

STEVEN LEACH, an individual;

EDMUND PETERSON, an individual;

DAN SALOMON, an individual; JOE

SILVA, an individual; DALE BRODSKY,

an individual; EYEPICTURES, INC., a

Missouri corporation; JUSTICE

OPTHALMICS, INC., a Tennessee

corporation; ZETA DEVELOPMENT LABS,

INC., a Tennessee corporation; and

JOHNNY JUSTICE, JR., an individual,

Defendants.

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I.

BACKGROUND

 The court has set out the relevant facts in this case

multiple times before. Suffice it to say that OIS, a

corporation with its principal headquarters and place of

business in Sacramento, California, manufactures digital

ophthalmic imaging systems in the United States, which integrate

"fundus cameras" – specially designed cameras used to photograph

the human eye – with computer hardware, digital cameras, optical

and electronic interfaces, and specially designed software to

create state-of-the-art digital images of the eye for diagnostic

purposes. OIS asserts that a crucial source of its value and

profitability lies in its trade secrets, which consist primarily

of customer lists, manufacturing and design know-how, vendor

information, and servicing know-how. In order to preserve the

confidentiality of its trade secrets, OIS requires all employees

to sign confidentiality agreements which prohibit OIS employees

from disclosing OIS' trade secrets during and after their

employment. 

In January 2002, defendant Mark Fukuhara, then the Vice

President of Operations of OIS, was terminated and left OIS. 

Over the next year several more employees, including Michael

Gerkovich, left OIS to join Fukuhara in a new business. By late

spring of 2002, OIS allegedly learned from a few of its

customers that these former employees ("defendant employees")

had formed a new business called Imaging Service Group, and that

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their business, at least in part, was providing service for

customers of OIS' imaging systems. The business was owned

principally by defendants Dale Brodsky, Gerkovich, and another

shareholder. OIS claims that Gerkovich solicited the business

of OIS customers who were seeking service for their OIS imaging

systems, and directed these customers to defendants’ new

business enterprise.

 In the spring of 2003, OIS allegedly became aware that

some part of defendant employees' business had been acquired by

entities under the control of defendant Johnny Justice, Jr.,

("Justice") a resident of the state of Tennessee and one of the

most prominent ophthalmic imaging specialists in the United

States. Justice is the 100% shareholder of defendant Zeta

Development Labs, Inc. ("Zeta"), a Tennessee Corporation. Zeta

also does business under the Justice Diagnostic Imaging, Inc.

name. OIS alleges that Justice, and another company he owns,

Justice Ophthalmics, Inc. (JOI) were placed on notice of OIS'

concern that the defendant employees were misappropriating OIS'

trade secrets and confidential information in 2003.

A. FACTS RELEVANT TO THE PENDING MOTION

In October 2005, OIS and defendant Zeta Development Labs,

Inc. (“Zeta”) entered into settlement negotiations. Plaintiff

submits that during the course of those negotiations, OIS was

told that Zeta’s chief executive officer (Johnny Justice, Jr.)

had material information about the other defendants. This new

information pertained to a Saturday morning raid on OIS’ office

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by two defendants. Specifically, Mr. Justice informed plaintiff

that he had been told by a Zeta employee, (and former defendant

in this case), Michael Gerkovich that he, Gerkovich, had

received delivery of certain equipment in March of 2002 and that

Gerkovich was told by defendant Burland and former OIS employee

Matt Jolly, that the equipment had been stolen from OIS on a

Saturday by Burland and Jolly after they gained unlawful access

to OIS’ premises. See Mot. to Amend at 3:20-25. 

OIS later obtained a statement and deposition from

Gerkovich himself confirming this account. According to

Gerkovich, Jolly and Burland told him that in March of 2002,

they gained access to OIS through the unauthorized use of an

entry card and the passcode of another employee. They told

Gerkovich that they went inside OIS, climbed a fence to get to a

back room, and took several OIS parts, including sync boxes,

video adapters, cables, and other parts. According to

Gerkovich, he met defendants Burland, Fukuhara, and Brodsky, and

former employee Matt Jolly, at a restaurant in Cape Girardeau,

Missouri, and during the meal Burland and Jolly talked about the

theft in front of Brodsky. See Pl.’s Mot. to Amend at 4:1-11. 

The motion to amend pertains to this newly acquired information. 

II.

STANDARDS

Because the court has filed a pretrial scheduling order,

Federal Rule of Civil Procedure 16 governs the procedure for

amending the pleadings. Rule 16 provides in part: 

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(b) [The district court] . . . shall, after consulting

with the attorneys for the parties and any

unrepresented parties, by a scheduling conference, ...

enter a scheduling order that limits the time, (1) to

join other parties and to amend the pleadings; (2) to

file and hear motions; and (3) to complete discovery. 

Fed. R. Civ. P. 16(b) (2005); Johnson v. Mammoth Recreations,

Inc., 975 F.3d 604 (9th Cir. 1992). 

Unlike Rule 15(a)'s liberal amendment policy which focuses

on the bad faith of the party seeking to interpose an amendment

and the prejudice to the opposing party, Rule 16(b)'s "good

cause" standard primarily considers the diligence of the party

seeking the amendment. 

The district court is given broad discretion under Rule 16. 

Johnson, 975 F.2d at 607. See also United States v. Marshall,

532 F.2d 1279, 1284 (9th Cir. 1976) (“In interpreting this rule,

courts have held that the granting of a discovery motion within

Rule 16(b) is a matter within the trial court's discretion which

will not be disturbed on appeal unless there was a clear abuse

of discretion.”)

 The district court may modify the pretrial schedule "if

it cannot reasonably be met despite the diligence of the party

seeking the extension." Fed. R. Civ. P. 16 advisory committee's

notes (1983 amendment); Harrison Beverage Co. v. Dribeck

Importers, Inc., 133 F.R.D. 463, 469 (D.N.J. 1990); Amcast

Indus. Corp. v. Detrex Corp., 132 F.R.D. 213, 217 (N.D. Ind.

1990); 6A Wright, Miller & Kane, Federal Practice and Procedure

§ 1522.1 at 231 (2d ed. 1990) ("good cause" means scheduling

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deadlines cannot be met despite party's diligence). 

Moreover, carelessness is not compatible with a finding of

diligence and offers no reason for a grant of relief. Cf.

Engleson v. Burlington Northern R.R. Co., 972 F.2d 1038, 1043

(9th Cir. 1992) (carelessness not a ground for relief under Rule

60(b)); Martella v. Marine Cooks & Stewards Union, 448 F.2d 729,

730 (9th Cir. 1971) (same), cert. denied, 405 U.S. 974 (1972). 

Although the existence or degree of prejudice to the party

opposing the modification might supply additional reasons to

deny a motion, the focus of the inquiry is upon the moving

party's reasons for seeking modification. See Gestetner Corp.

v. Case Equip. Co., 108 F.R.D. 138, 141 (D.Me. 1985). If the

moving party was not diligent, the inquiry should end.

Finally, if the trial court determines that refusal to

allow a modification of the pretrial order could result in

injustice, while allowing the modification would cause no

substantial injury to the opponent and no more than a slight

inconvenience to the court, modification is appropriate. United

States v. First Nat. Bank of Circle, 652 F.2d 882 (9th Cir.

1981).

III.

ANALYSIS

In interpreting the "good cause" requirement under Fed. R.

Civ. P. 16(b), the court considers, primarily, "the diligence of

the party seeking the amendment." Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 1992). As a

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secondary consideration, the court considers the degree of

prejudice to the opposing party. Id. 

A. DILIGENCE 

Plaintiff’s motion to amend was prompted by information

that it received in the fall of 2005. Spesifically, plaintiff

learned that property had been stolen from OIS’ facility in

March of 2002. Plaintiff explains that prior to its

conversation with Mr. Justice in the fall of 2005, “OIS had been

completely unaware of this theft, despite previously having

taken the depositions of Fukuhara, Burland, Gerkovich, and

Justice.” Pl.’s Mot. to Amend at 3:26-28. This information

offered new evidence for a claim conversion against defendants

Burland, Fukuhara, Brodsky and Eyepictures, Inc. 

Under California state law, conversion is the wrongful

exercise of dominion over the property of another. The elements

of conversion are: (1) the plaintiff's ownership or right to

possession of the property; (2) the defendant's conversion by a

wrongful act or disposition of property rights; and (3) damages. 

Burlesci v. Petersen, 68 Cal.App.4th 1062, 1066 (1st Dist.

1998). 

Prior to obtaining the information about the raid,

plaintiff could not have asserted in good faith a claim for

conversion. Plaintiff’s diligence is also apparent in that

prior to the fall of 2005, plaintiff had deposed defendants

Burland and Gerkovich and neither defendant told plaintiff about

the raid. Plaintiff did not learn of the raid until it entered

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settlement negotiations with Zeta and spoke to Mr. Justice. 

Based on these facts, it is clear that plaintiff was diligent.

Defendants’ primary objection is that amending the

complaint would be futile. Specifically, defendants maintain

that a claim for conversion would be barred by the statute of

limitations and the relation-back doctrine would not apply. See

Defs.’ Opp’n to Mot. to Amend at 6. The court cannot agree.

Even if the statute of limitations has expired, the

relation-back doctrine does apply in a case such as this. 

Under Fed. R. Civ. P. 15(c), whenever the claim asserted in the

amended pleading arises out of “the conduct, transaction, or

occurrence set forth or attempted to be set forth in the

original pleading, the amendment relates back to the date of the

original pleading.” Fed. R. Civ. P. 15(c). Moreover,

Amendments seeking to add claims are to be granted

more freely than amendments adding parties. ‘When a

suit is filed in a federal court under the [Federal

Rules of Civil Procedure], the defendant knows that

the whole transaction described in it will be fully

sifted, by amendment if need be, and that the form of

the action or the relief prayed or the law relied on

will not be confined to their first statement.’

Union Pacific R. Co. v. Nevada Power Co., 950 F.2d 1429, 1432

(9th Cir. 1991) (internal citations omitted). In the case at

bar, the proposed amendment does relate direclty to the conduct,

transactions, and occurrences that are detailed in the initial

complaint. Namely, the allegation of conversion is very much

related to the broad set of facts that gave rise to the

allegations copyright infringement, false advertising, violation

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1 Gil Allen, plaintiff maintains, can provide information

about the value of the items that were allegedly stolen. 

9

of the Computer Fraud and Abuse Act, breach of contract,

misappropriation of trade secrets, and interference with

contracts. For this reason, the court finds that the relationback doctrine would ensure that the amendment would not be

barred by the statute of limitations. 

B. POTENTIAL PREJUDICE TO DEFENDANTS

Defendants maintain that they would be prejudiced by the

amendment as they plan to deny the allegations asserted in

Gerkovich’s statement and that they would like the opportunity

to depose Mr. Jolly on the issue of why he did not reveal this

incident either to plaintiff, when signing his affidavit, or at

the time of his deposition. See Defs.’ Opp’n to Mot. to Amend

at 5:14-25. The court does not see how these arguments

constitute prejudice. 

Plaintiff asserts, and defendants do not dispute, that

Gerkovich has already been deposed by defendants on the express

topic of the OIS theft. All the other witnesses have been

deposed by defendants and can be subpoenaed at trial. 

Furthermore, plaintiff states that it “does not expect to offer

any physical or documentary evidence relating to the conversion

claim, other than a price list of equipment that was likely

stolen, which will be produced prior to the anticipated

deposition of Gil Allon.” Mot. to Amend at 7:24-48.1 

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Defendants fail to put forth any persuasive reasons for not

granting the motion to amend. This is especially true in light

of the fact that "Rule 16(b)'s ‘good cause’ standard primarily

considers the diligence of the party seeking the amendment." 

Johnson, 975 F.2d at 609. Given that plaintiff has met the

diligence standard discussed above, any considerations regarding

the possible prejudice to defendants is outweighed.

IV.

ORDERS

 For the foregoing reasons, the court hereby ORDERS

that:

1. Plaintiff’s motion to amend is GRANTED; and

2. The Clerk is directed to FILE the proposed second

amended complaint received on January 11, 2006; and

3. The matter is SET for a Status Conference on February

6, 2006 at 1:30 p.m. The Pretrial Conference set for that date

and time is VACATED.

IT IS SO ORDERED.

DATED: January 25, 2006.

/s/Lawrence K. Karlton 

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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